BNPL Affirm Releases Business Performance Update

Affirm Holdings, Inc. (NASDAQ: AFRM), the payment network that empowers consumers and “helps merchants drive growth,” provided an update (on March 14, 2022) on its business performance, “including its current funding capacity and availability, and raised the Company’s third quarter and full-year fiscal 2022 financial outlook.”

In recent days, shares in Affirm have struggled to regain footing – much like the rest of the market –  but a halted securitization has raised some concern for investors. It has been reported that Affirm had to pump the brakes on an asset-backed securities sale due to cold feet from a large investor.

Additional chatter revolving around the potential for additional regulation does not help as well.

Affirm’s fiscal quarter-to-date financial performance has “exceeded expectations, putting the company on track to exceed the third-quarter financial outlook it provided on February 10, 2022.”

Gross merchandise volume (GMV) growth “remained strong, driven in particular by the Company’s enterprise partnerships.” Revenue less transaction costs has “exceeded expectations driven by outperformance in both network revenue and transaction costs, including provision for credit losses.”

Excluding transaction costs, Affirm’s operating expenses have “trended below expectations for the quarter, resulting in a better-than-expected adjusted operating loss as a percentage of revenue thus far.”

Given this solid performance, the firm is now “raising its financial outlook for both its third quarter and full-year fiscal 2022.” (Note: for detailed breakdown, check here.)

As noted in the update, the company’s diversified funding strategy–“which leverages multi-year committed warehouse credit facilities, forward-flow arrangements, and asset-backed securities (ABS) issuances–is designed to enable the Company to fund its business efficiently and effectively, without reliance on any single funding channel.”

For example, in the current volatile market environment for pricing ABS issuances, the firm’s diversified funding strategy “allows it to maintain discipline by leveraging other sources of liquidity with attractive economics.”

Affirm partners with diverse counterparties “ranging from banks to pension funds and asset managers for its warehouse credit facilities and forward-flow arrangements.”

As of February 28, 2022, Affirm had “approximately $9.3 billion in fully committed funding capacity, providing the Company with the ability to fund more than $20 billion in annual GMV.”

The company “remains in compliance with all applicable funding covenants, and its expectations relating to future funding covenant compliance are unchanged.” For example, for substantially all of its funding, “the most restrictive of the company’s delinquency covenants is a three-month average 30+ day delinquency rate of less than or equal to 6%.”

As mentioned in a release:

The Company added over $400 million of additional funding capacity in the first two months of calendar year 2022, after adding $4.2 billion of capacity during calendar year 2021. In addition to its approximate $9.3 billion in funding capacity as of February 28, 2022, the Company also had cash and cash equivalents of over $2.5 billion as of December 31, 2021, with an additional $700 million of restricted cash and securities available for sale at fair value.

As covered, Affirm’s mission is “to deliver honest financial products that improve lives.” By building a new kind of payment network — “one based on trust, transparency and putting people first — [they] empower millions of consumers to spend and save responsibly, and give thousands of businesses the tools to fuel growth.”

Shares in Affirm closed today at over $28 – just last week shares were trading above $36 but still far below its 52 week high of over $176.

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